White House tries to pitch “Tax Fairness” with fuzzy math

In an election year there is no end to the ways that an incumbent President will spin hot button issues to gain the attention of voters. At times this is for the benefit of the nation, at others it is for the benefit of a re-election effort. Depending on your view the “Buffet Rule” could be either. But as spun by the Obama Administration it appears to clearly be one not the other.

The “Buffett Rule”, now simply refered to as “tax fairness”, is at its heart a tax hike on successful and wealthy Americans. It increases the required tax payment on those that comprise the very top incomes of the nation. That is regardless if the income is derived from investments (paid for with already taxes savings over a lifetime of risk and patience, and further taxed after successful investment), inheritence, success in creating/developing businesses small and large, or any other endeavour (like success in entertainment/sports/winng the lottery ect).

The Buffet Rule or tax fairness is defined by some as a form of social justice. This is the latest incarnation of the purpose of the Rule. It started out as an alternative to the Alternative Minimum Tax – which was debunked by tax experts. The most that could be expected currently from the tax fairness is that .3% of taxpayers would wind up paying $47 billion more in taxes over 10 years. A figure that does not even begin to address the $18.8 trillion in national debt at the end of 10 years in any meaningful manner.

Thus came about the view that states it is a moral, and according to Vice President Biden “patriotic”, imperative. That having acheived wealth in excess of the average American requires a high hurdle of taxes, to allow the Government to then use these funds to redistribute to the public via entitlement programs. Programs that are created and manipulated by the poltical whims of whatever Administration is in power at the time.

The result of such entitlement programs is the majority of the non-discrectionary spending annually by the Government (SSI, Unemployment, Medicaid, Medicare, ect). It is also the key to the deficit spending by the Government, as exemplified by the slush-fund manner in which Social Security funds are used for other Government spending (19% of 2010 non-discrectionary spending). A system that has created the real and upcoming bankruptcy of Social Security – delayed only by the speed of future spending by the Government.

Others define the Buffett Rule or tax fairness as economic class warfare. They highlight the fact that consistently 40 – 50% of the American taxpaying public either receive a refund or owe no Federal taxes each year (51% in 2009). The reality is that consistently the top 10% of earners pay some 60 – 70% of all income taxes taken in each year (73% in 2007 according to CBO).

In addition, as we have previously highlighted, there is nothing preventing any American from donating whatever funds they choose to the IRS. Even Warren Buffett, which the Rule is named after, failed to donate a dime to the IRS – even as he rallied support to created a means to force the “uber-rich” to pay more in taxes. In fact, until Buffett was embarrassed by a Rep. Scott Rigell of VA who has contributed more voluntatily to the IRS and thus forced Buffett to match that contribution, Buffett has never paid a dime voluntarily to the IRS. [It should be noted that one of the corporations that Warren Buffett controls is currently being audited by the IRS]

The White House sought to highlight their view on the issue of tax fairness in a video yesterday.

Sadly, the manner in which the White House comes to these conclusions is a fabrication and an example of political opportunism rather than fact it turns out (as reported on Fox News at 12:10pm April 18, 2012). The tax percentages cited are impossible to duplicate for income taxes without manipulation to alter the results. Based on income taxes only the real numbers are closer to 7%, 10%, and 14% with the highest incomes at 18.9% tax rates – which is a progressive income tax rate.

As Roberton Williams at Tax Policy Center said in February 2012

“On average, middle-income households will pay 2015 taxes totaling about 15 percent of their income (using the legislation’s definition). Without the Buffett rule, more than 99 percent of millionaires will pay more than that and only about 4,000 will pay less.”

Thus the question that should be asked is, if the White House must alter the math to generate numbers that present a positve image of the Buffett Rule – and that Rule cannot do what it was initial touted to do, and it fails to do more for the economy than is already being done by existing tax law – how is this more than just class warefare designed to pander to voters?

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